If the interest rate on a 20 year housing loan of Rs 50 lakh home lowers to 11% from 11.25%, it will translate into a saving of Rs 853 per month in the EMI.

MUMBAI: Banks will cut lending rates after the Reserve Bank of India reduced its key interest rate by 25 basis points on Tuesday, the head of industry body Indian Banks' Association, KR Kamath, said in a post-policy conference.

Borrowers could as a result see better days ahead as lending rates will come down. State Bank of India Chairman Pratip Chaudhuri also said banks are likely to cut lending rates.

Commenting on RBI's action, SBI Managing Director A Krishna Kumar said "a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI's action is positive".

Keki Mistry of HDFC said that CRR cut, which has come as a pleasant surprise will benefit banks. "Repo and CRR rate cut will help lenders lower rates," he told ET Now.

Indian Overseas Bank executive director A K Bansal said the RBI's action will result in moderation of interest rates in the coming days.

Both lending and deposit rates are expected to see a downward revision which will improve growth prospects, he said.

According to Canara Bank executive director A K Gupta, the bank would consider interest rate cut in the light of RBI policy action.

If the interest rate on a 20 year housing loan of Rs 50 lakh home lowers to 11% from 11.25%, it will translate into a saving of Rs 853 per month in the EMI.

RBI lowered its key policy rate for the first time in nine months on Tuesday, but struck a cautious note on further easing as it waits to see how the government's upcoming budget aims to bring a bloated fiscal deficit under control.

With more rate cuts by the RBI on the horizon this year, new borrowers stand to gain as banks pass on the benefit to them. If they also cut their benchmark base rates (to which home loan rates are linked), it will benefit the existing borrowers as well.